• 1 hour Weatherford Looks To Sell Assets To Ease Some Of $8B Debt
  • 2 hours OPEC Set To Move Fast On Cut Extension Decision
  • 5 hours Nigeria Makes First Step Away From Oil
  • 16 hours Russia Approves Profit-Based Oil Tax For 2019
  • 20 hours French Strike Disrupts Exxon And Total’s Oil Product Shipments
  • 22 hours Kurdistan’s Oil Exports Still Below Pre-Conflict Levels
  • 1 day Oil Production Cuts Taking A Toll On Russia’s Economy
  • 1 day Aramco In Talks With Chinese Petrochemical Producers
  • 1 day Federal Judge Grants Go-Ahead On Keystone XL Lawsuit
  • 1 day Maduro Names Chavez’ Cousin As Citgo Boss
  • 1 day Bidding Action Heats Up In UK’s Continental Shelf
  • 2 days Keystone Pipeline Restart Still Unknown
  • 2 days UK Offers North Sea Oil Producers Tax Relief To Boost Investment
  • 2 days Iraq Wants To Build Gas Pipeline To Kuwait In Blow To Shell
  • 2 days Trader Trafigura Raises Share Of Oil Purchases From State Firms
  • 2 days German Energy Group Uniper Rejects $9B Finnish Takeover Bid
  • 2 days Total Could Lose Big If It Pulls Out Of South Pars Deal
  • 2 days Dakota Watchdog Warns It Could Revoke Keystone XL Approval
  • 3 days Oil Prices Rise After API Reports Major Crude Draw
  • 3 days Citgo President And 5 VPs Arrested On Embezzlement Charges
  • 3 days Gazprom Speaks Out Against OPEC Production Cut Extension
  • 3 days Statoil Looks To Lighter Oil To Boost Profitability
  • 3 days Oil Billionaire Becomes Wind Energy’s Top Influencer
  • 3 days Transneft Warns Urals Oil Quality Reaching Critical Levels
  • 3 days Whitefish Energy Suspends Work In Puerto Rico
  • 3 days U.S. Authorities Arrest Two On Major Energy Corruption Scheme
  • 4 days Thanksgiving Gas Prices At 3-Year High
  • 4 days Iraq’s Giant Majnoon Oilfield Attracts Attention Of Supermajors
  • 4 days South Iraq Oil Exports Close To Record High To Offset Kirkuk Drop
  • 4 days Iraqi Forces Find Mass Graves In Oil Wells Near Kirkuk
  • 4 days Chevron Joint Venture Signs $1.7B Oil, Gas Deal In Nigeria
  • 4 days Iraq Steps In To Offset Falling Venezuela Oil Production
  • 4 days ConocoPhillips Sets Price Ceiling For New Projects
  • 7 days Shell Oil Trading Head Steps Down After 29 Years
  • 7 days Higher Oil Prices Reduce North American Oil Bankruptcies
  • 7 days Statoil To Boost Exploration Drilling Offshore Norway In 2018
  • 7 days $1.6 Billion Canadian-US Hydropower Project Approved
  • 7 days Venezuela Officially In Default
  • 7 days Iran Prepares To Export LNG To Boost Trade Relations
  • 7 days Keystone Pipeline Leaks 5,000 Barrels Into Farmland
Alt Text

Can Australia Surpass Qatar As World’s Top LNG Supplier?

Australia, the second largest exporter…

Alt Text

Russian LNG Unfazed By U.S. Sanctions

Facing a new round of…

Kent Moors

Kent Moors

Dr. Kent Moors is an internationally recognized expert in oil and natural gas policy, risk management, emerging market economic development, and market risk assessment. His…

More Info

Could Qatar’s LNG Gamble Increase Tensions In The Region?


Early this morning (Qatar time), Qatar Petroleum announced it planned to increase production dramatically from its huge North Field in the Persian Gulf.

The increase calls for the country’s gas production to climb 30% by 2024, and that’s going to have a huge impact.

Qatar is currently the global leading exporter of liquefied natural gas (LNG), a result of existing production from the North Field. It is also the first gas exporter in the world to put all of its gas into liquefied natural gas (LNG), ending all exports via pipeline.

LNG is natural gas cooled to about -260 °F to a liquid state, transported by specially designed tankers, then regasified at a receiving terminal someplace else in the world and injected into existing delivery pipeline networks. It allows a significant expansion in gas exports.

And the LNG market worldwide is accelerating rapidly. However, so is the expected supply over the next decade.

The Qatari increase, should the country follow through, could create an LNG glut internationally, thereby reducing the price, including for U.S. LNG exporters.

It also puts a fuse on an already very charged situation…

Qatar is Being Blockaded by Its Neighbors

Qatar is currently at loggerheads with Saudi Arabia, Bahrain, the United Arab Emirates (UAE), and Egypt.

The four countries are demanding that Doha (Qatar’s capital) break ties with Iran, end funding terrorism (a charge Qatar has vehemently denied), close the Al-Jazeera news service, and over a dozen other demands.

The Saudis have closed Qatar’s primary overland line for trade, and all four of the nations have closed their respective air spaces for flights from Qatar, including all those by national carrier (and my personal favorite service in the region) Qatar Airways.

The strategic Strait of Hormuz, located where the Persian Gulf meets the Arabian Sea, remains open. This allows Qatar’s LNG to move to market, along with much of the crude oil volume from Saudi Arabia and other Gulf nations further north.

The Strait has the UAE on one side of its narrow opening and Iran on the other. This guarantees it remains as a flashpoint.

But the Saudis and their allies are not likely to move to obstruct traffic in the face of the Iranian Revolutionary Guard Navy.

Quite apart from politics, Qatar relies on Iran for three other important LNG reasons.

First, the countries jointly develop the huge North and South Pars offshore gas fields, among the largest in the world.

Second, should pressure emerge at Hormuz, Qatar may need to rely on contract swaps allowing it to export LNG from Iranian ports south of the Strait in order to have any exports at all.

Third, as Iran develops its own gas and LNG projects, Doha becomes a more desirable location for joint access to capital.

Qatar, despite the current crisis, has the highest per capita wealth in the world and is a fast-rising challenger to the UAE’s Dubai as the regional location to strike deals.

As Riyadh engineers a tightening of the sanctions, Doha will move closer to Tehran.

But that’s not the only impact of Qatar Petroleum’s announcement…

Once Again, U.S. Energy Companies are Under Attack

The other impact of note recalls the OPEC November 2014 decision to defend market position and the subsequent collapse in oil prices. Then, one of the targets was U.S. shale oil production.

Looks like déjà vu all over again, because Qatar may throw a wrench into U.S. plans to move into the world LNG market.

Exporting LNG has been an expectation for some time. It would allow for a continuing increase in shale and tight gas production, with the additional volume moving into the export flow. Related: Saudi Reshuffle Could Completely Shake Up Oil Markets

That flow had been intended for both Europe and Asia, the latter made possible thanks to the recently completed widening and deepening of the Panama Canal, which allowed exports from the Gulf Coast.

In both cases, the local markets provide higher prices than in the U.S., although transportation costs provide temper this advantage.

Cheniere Energy Inc. (with the appropriate trading ticker symbol of LNG) currently has the sole operational LNG export terminal in the “lower 48” U.S. states.

But four others are under construction, and as many as 20 in total may end up being approved. Assuming, of course, that the export market justifies the expense.

Now, Cheniere has five major multibillion-dollar long-term sales agreements with some of the largest LNG importers in both Europe and Asia.

And those agreements also have some very intriguing clauses to provide pricing protection for bringing LNG to market.

You see, Cheniere and other American exporters are relying upon the establishment of guaranteed local spot markets to make their LNG volume and availability more attractive.

At present, the exports are not cost-effective against pipelined gas, although the expansion of an LNG network would open significant new markets…

Whatever Qatar Does, U.S. LNG Will Be a Strong Competitor

Yet competition in Asia from huge projects on Papua New Guinea, five major LNG export developments in Australia, and expanded Sakhalin production from Russia, along with major networks already in place for MENA (Middle East North Africa) deliveries to Europe are lowering expectations.

For its part, Qatar is dominant in both the European and Asian markets, with the largest fleet of tankers in the world, established infrastructure, and multi-year contracts.

Its decision to expand its LNG trade by some 30% is certain to put some downward pressure on prices. Related: Russian Energy Minister: No Additional Output Cuts Are Needed

U.S. companies note that Beijing has recently allowed its domestic importers to strike private deals with American exporters. However, some observers believe the Chinese may simply use the new option to leverage lower prices from Qatar.

Another element should be remembered as we watch whether Qatar delivers on the increasing gas production decision.

As the widening of the global LNG market unfolds, a rage of arbitrage and swaps will emerge quite unlike anything ever witnessed in the energy sector.

As I will explain when we reach this point, there will be a strong position for U.S. LNG…

Regardless of what Qatar (or any other gas-producing nation) ends up doing.

By Kent Moors via Oilandenergyinvestor.com

More Top Reads From Oilprice.com:

Back to homepage

Leave a comment

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News